Articles of Organization
The Articles of Organization are a document filed when registering a limited liability company (LLC). They serve as a public record that the LLC is established and operating legally. Typically, the Articles of Organization include the LLC’s basic details like name and address. It’s essential to file Articles of Organization with the state to establish the LLC’s existence and ensure it is operating legally.
Operating Agreement
An Operating Agreement outlines the LLC’s internal operations. It is a private document for the LLC’s members to resolve disputes and provides more specifics on management, voting rights, profit distribution, and operations. Operating Agreements give LLCs the ability to govern the business according to their own rules rather than the default state rules. They describe the economic and business arrangement of the LLC members and are a contract between the LLC’s members and managers, setting forth the rules and regulations that govern the company’s management and decision-making.
While an Operating Agreement is not required by law, it is strongly recommended for all LLCs to help prevent disputes and provide clarity in the event of disagreements or changes in ownership. The Operating Agreement is an essential internal governance document that is different from the Articles of Organization, which are a foundational document required for the legal existence of the LLC.
The two serve different purposes and are not interchangeable.
Distinctions and Recommendations
Is there a difference between a company agreement and an operating agreement? Yes, these terms generally refer to the same document, the Operating Agreement, which guides the LLC’s internal operations.
While Articles of Organization are required by state law to form an LLC, an Operating Agreement is advisable to provide clarity on the structure and workings of the business. It is highly recommended to create an Operating Agreement for multi-member LLCs to outline the specifics of the business’s internal operations and governance.
What is another name for the operating agreement? It may also be referred to as a company agreement.